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United’s woes reveal the critical importance of preparing for reputational risk

May 10, 2017 by Jonathan Hemus

As one of the world’s leading airlines, United Airlines has no doubt conducted countless crisis simulations based on operational risks such as a plane crash or a terrorist attack. Despite this, a company that has crisis management planning embedded in its DNA was completely wrong-footed by the recent passenger overbooking incident.

Why?  Social media has dramatically changed the speed, impact and damage an incident can cause to a company’s reputation. Images of United Airline’s manhandling of one of its passengers last month were shared around the world within seconds, causing major damage to the company’s reputation.

Reputational risk

But United Airlines is certainly not alone in grappling with reputational issues. In the last couple of years, we have seen many large organisations under fire for issues which threaten their strong and positive reputations. Examples include the VW emissions scandal, mining company Rio Tinto facing bribery allegations and Tesco having to address accounting malpractice.

Whilst the more traditional operational risks of fires, accidents and environmental incidents are still very important, this ‘new’, often more challenging, category of reputational risks – those to do with people, values, behaviours and ethics -  can be far more damaging and harder to manage. As a result, in many organisations they are simply not being properly planned for.

Managing reputational risk

  • Why are reputational risks more damaging?  In today’s world, there is an increased focus on integrity and ethical corporate behaviour, not just financial performance. Crises which call into question an organisation’s ethics are likely to significantly erode that most valuable yet fragile asset, trust.
  • Why are reputational risks harder to manage?  Culturally organisations often find reputational risks (and especially those related to senior management behaviour) almost too uncomfortable to consider. Even when reputational risks of this kind emerge, a sense of denial often hinders the organisation from mounting a successful response. 

The challenge for businesses though is that research from Oxford Metrica shows that crises that challenge a company’s values are usually the most damaging of all.

Overcoming barriers to crisis management

So how do you overcome these barriers? Here are two critical steps every crisis management leader should take to prepare for reputational risks and to avoid long-lasting reputational damage:

  1. Create a crisis resilient culture in your organisation to reduce the likelihood of a crisis occurring in the first place (take a look at our blog to find out how to begin this process)
  2. Identify and prioritise your reputational risks by undertaking a reputational risk assessment to ensure that you are aware of and managing the full risk landscape

 In an age when crises emerge and explode at the speed of light, United’s experience underlines the critical importance of preparing to manage reputational risk.

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